Fiscal Policy Instruments: Budget, Revenue, Debt
Main Fiscal Policy Instruments
The main fiscal policy instruments are explained below:
1. Budget
A budget is an estimate of government expenditures and revenues for a fiscal year, usually presented to the parliament by the finance minister. In Nepal, the budget is submitted to the parliament by the finance minister in the month of Ashadh, each fiscal year. It is a financial document containing a preliminary approval of estimates of government expenditures and revenues. In other words, the estimated
Read MoreInvestment Decisions: Concepts, Types, and Selection Methods
Investment Decisions
1. Concepts and Types of Investments
Investments are classified as:
- Fixed Assets and Current Assets
- Financial Investments and Productive Investments
Productive investments are further classified as:
- Replacement investment to maintain the company (to replace worn equipment)
- Replacement investment to reduce costs or for technological improvements (replacing equipment)
- Investment for expansion of existing products or markets (to increase the production of existing products)
- Expansion investment
Business Finance: Internal, External, and Long-Term Sources
Sources of Finance
A business might have access to various sources for financing its needs. These sources of finance can be classified as:
Internal and External Sources
Internal: This is money raised from inside the business. It includes:
- Sales of Assets: Businesses might sell off old, obsolete assets that are no longer used to raise additional cash.
Advantage: Better use of capital.
Disadvantage: A new business might not have any old or obsolete assets.
- Retained Profits: Businesses (especially limited
Short-Term External Financing: Options and Strategies
Short-Term External Financing
Short-term external financing includes all funds raised by a company from external sources, with a maturity of one year or less. Common instruments include:
- Commercial loans and supplier credit
- Short-term bank loans
- Discounts on commercial paper
- Sales of receivables (factoring)
Trade and Supplier Credit
Also known as trade credit, this type of financing arises from the payment terms offered by suppliers after a sale. These terms typically range from 30 to 90 days, allowing
Read MoreEssential Microeconomic Concepts Explained
Microeconomics Key Concepts and Principles
Incorrect Response: A perfectly competitive firm is also known as: incorrect price offeror (*Correct: Competitive Price * atomistic acceptor)
Bertrand Duopolists Equilibrium: Competitive balance
Bilateral Monopoly: A market characterized by the existence of a monopolist and a monopsonist.
Final Balance of Trade in General Equilibrium: If Pareto optimum must be: At one point on the contract curve between the initial indifference curve.
General Equilibrium Model
Read MoreUnderstanding Economic Growth and Development Factors
Economic Growth and Development
Economic growth is the increased production of goods and services within a year. It’s measured by GDP, especially GDP per capita.
Development encompasses economic growth along with structural changes that improve economic and social conditions, increasing the quality of life for a country’s people.
Development is measured using social and economic indicators:
- Social Indicators: Life expectancy, level of education, workforce skills.
- Economic Indicators: GDP or GDP per capita,